Germany Takes Major Role in Managing Euro Debt Crisis

Germany was hit hard by the global financial crisis in late 2008 and 2009. In October 2008, the government financed a $68 billion bailout of one of the country's largest banks, Hypo Real Estate, to prevent it from collapse. That was followed in February 2009 with a $63 billion stimulus package to help lift the battered economy out of recession.

Merkel earned another four-year term as chancellor in September 2009 elections. Her party, the Christian Democrats, formed a governing coalition with the pro-business Free Democrats. President Kohler was reelected in 2009. He resigned in May 2010 after his statement that a country of Germany's size sometimes must justify troop deployment abroad to protect its economic interests sparked controversy and outrage. He was replaced by Christian Wulff.

Germany learned during the debt crisis of 2010 and 2011 that responsibility comes with holding the mantle as Europe's largest economy.
Indeed, Merkel faced criticism in early 2010 for her delay in seeking parliamentary approval of a bailout package for Greece, which was teetering on the brink of financial collapse. International observers remarked that she should have acted sooner; she was criticized by voters for coming to the rescue of another country. Nevertheless, parliament approved a 22.4 billion euro bailout for Greece in May 2010. Voters expressed their displeasure with Germany's contribution at the polls—Merkel lost her majority in the upper house of parliament in May when her coalition lost regional elections in North-Rhine Westphalia. That defeat was followed by another in March 2011 in Baden-Wuerttemberg.

Germany's parliament approved a plan to increase the euro-zone's bail-out fund in September 2011, and that was followed in late October with the agreement by the leaders of the euro zone of a wider package meant to bring Europe's debt crisis under control.

Christian Wulff resigned as president in February 2012 to face a corruption inquiry. Despite objections by Merkel, Parliament approved Joachim Gauck, a Lutheran pastor from East Germany, as his successor. Gauck was the preferred candidate of the opposition and one of Merkel's coalition partners, the Free Democratic Party. His election was seen as a rebuke to the chancellor.